Indonesia's currency, the rupiah, is expected to stabilize in the coming months after experiencing significant depreciation throughout the year.
Analysts expect Bank Indonesia to continue taking steps to support the rupiah's value, including raising interest rates and intervening in the foreign exchange market to reduce pressure on the currency.
Since the beginning of the year, the rupiah has depreciated by about 7% against the United States (US) dollar. However, the situation is starting to show signs of recovery as the rupiah rose by about 1.3% from a record low recorded last month.
Several financial institutions also predict that the rupiah will continue to strengthen in the third quarter of this year if the central bank's policy remains firm.
In addition to defending the currency's value, Bank Indonesia's efforts are also aimed at attracting foreign investors to continue investing in the country's government bonds.
Currently, Indonesian government bonds offer a yield of about 7.25%, one of the highest among emerging markets.
This situation is expected to help increase foreign capital inflows and provide support to the country's financial markets.
Although the outlook for the rupiah is improving, several risks could still put pressure on the currency.
Among them is the increase in world oil prices, which is increasing the cost of energy subsidies for the Indonesian government following the escalating conflict in the Middle East.
In addition, investors are also monitoring the ability of President Prabowo Subianto's government to control the fiscal deficit to remain below target.
At the same time, Indonesia received positive news when rating agency S&P Global Ratings maintained the country's investment-grade credit rating.
However, the market is still cautious about the review of the status of the Indonesian stock market by MSCI. If the market status is lowered, it has the potential to cause a large outflow of foreign funds.
Therefore, analysts believe that investor confidence needs to be further strengthened through consistent economic policies, not just relying on monetary policy alone.
